July 1997 • Volume 7 • Number 7
An Update On The Retail Supply Chain
By Leslie Lauer, CPIM
It has been two-and-one-half years since the Kmart Corporation embraced the supply chain management techniques as taught and practiced by APICS professionals. During that time, more than 20 associates in Kmart's headquarters have been Certified in Production and Inventory Management, and better than 70 associates are in the process of pursuing certification through classes and tests. Several associates are working to become Certified in Integrated Resource Management, and all merchandise operations associates are exposed to the APICS body of knowledge on a daily basis.
So what has all of this education done for Kmart?
APICS shows how a number of "best practices," judiciously applied, can have a huge effect on the success or failure of an organization. Teamwork, process improvement rather than automation, cycle counting and, above all, focus on the customer are a few of these principles. Let's look at some of these principles, how they have been applied in the Kmart environment and the results that they have produced.
One of the most visible changes that has been made at Kmart in the past few months has been the physical relocation of merchandising associates, including planning and inventory management personnel, into functional teams. This has produced a "cellular manufacturing" look and feel to the merchandising processes. The modular approach makes it much simpler for buyers, planners, advertising coordinators, sales and marketing associates and financial planning personnel in each business unit to conduct business in close association with each other. It also permits each business unit's goals to be coordinated, instead of at odds with each other.
Process improvement has also been a focus in planning and inventory management. Merchandising processes such as assortment planning, purchasing and space management were prime candidates for revision. The processes that were in use two years ago were not producing desired sales and profits. Changes were necessary for Kmart to move forward. One of the byproducts of these revisions has been the recognition that more, not less, people may be needed to accomplish some of these tasks. The result of these changes is enhanced customer acceptance (as evidenced by sales increases) and better-looking, better- stocked stores.
Cycle counting, long a staple of the manufacturing world, has become prevalent in the retailing world as well. Kmart has improved the integrity of the inventory in the entire chain through its increased use of cycle counting at all levels. Cycle counting goals have been established, results are published, and everyone from headquarters executives to sales clerks in the stores is involved in maintaining accurate inventories.
Kmart has also improved its position within the supply chain by establishing strategic partnerships with a number of vendors. Strategic partnerships seek to create win-win situations and true partnering for retailer and vendor. This is a departure from traditional vendor-managed inventory programs where the vendor and the retailer work together, but as separate entities. Strategic partnering is accomplished through the work of ad hoc teams with members from the vendor and Kmart. The teams are established to solve problems that crop up in areas such as forecasting, order management, order fulfillment or transportation. These teams create open lines of communication at all levels in both companies, especially at levels where the actual work is done.
All of these changes to the way Kmart does business are aimed at one thing: the continuous improvement of customer service. A renewed focus on the customer has been instrumental in the recent gains in sales and profits enjoyed by Kmart.
Followers of the Kmart story are aware of the following facts. After 13 straight quarters of lower profits, the company has increased profits in the most recent two quarters. Indeed, same store sales in March 1997 alone increased 11.1 percent! This can be attributed, in many cases, to the education some of the associates have received through APICS, and the application of that education in critical areas of the company.
This is not to say that the journey for Kmart has come to an end. While praising the efforts made over the past 24 months, copyrighted stories in Chain Store Age and Mass Merchant Retailer quickly pointed out that more work is still to come if the early turnaround signs are real. The challenges of stiff competition, higher customer expectations and motivation of nearly 300,000 associates are reminders that Kmart has its work cut out for itself if the best is yet to come.
Nonetheless, the future looks bright for the chain that
seemed near bankruptcy just two years ago. And some of the
APICS principles that have been put into practice at Kmart
have played no small part in this about-face. So stop in to
your neighborhood Kmart, and do not be surprised if you hear
the "blue light special" on improved processes, well-stocked
shelves and customer friendliness.
Leslie Lauer, CPIM, is currently manager of allocations for
the Kmart Corp. Based in Almont, Mich., Lauer's experience
with Kmart has included positions in store management,
financial analysis and merchandise planning. She currently
serves as chapter president of the APICS Detroit
Chapter.
Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.
Web Site © Copyright 2020 by Lionheart Publishing, Inc.
All rights reserved.
Lionheart Publishing, Inc.
2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA
Phone: +44 23 8110 3411 | br>
E-mail:
Web: www.lionheartpub.com
Web Design by Premier
Web Designs
E-mail: [email protected]